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World Bank: Malaysia’s Social Protection Has Breadth But Not Depth

Because Malaysia’s social protection standards reach almost everyone, it just means that there is less to go around. 

The working world is constantly changing. New technologies are just a better option when it comes to quality and efficiency. Thus leaving the nation’s labour force more vulnerable. 

More and more people are forced to take on more than one job, take on part-time work, look into means of self-employment, the gig economy as well as zero-hour contracts. These changes also challenge the effectiveness of the existing social protection schemes meant for these exact times[1]

Source: Digital News Asia

There are two types of social protection programs in Malaysia:

  1. Non-contributory social assistance: (cash transfers/ targeted feeding programmes/ etc)
  2. Contributory social assistance: (old age & disability pensions/ unemployment insurance/etc)[1]

The nation’s main protection segment consists of social assistance provisions (number 1) for most of the vulnerable communities.  Social insurance spending is much more limited in Malaysia.

According to 2016 data, Malaysia’s social assistance reaches only 67% of Malaysian citizens, but barely 50% are covered by social insurance. Of which, less than 10% received social insurance payments in 2016[1]

women in poverty
Source: Business Times

Performance of Malaysia’s Current Social Assistance Programmes

So, just how effective are these programmes? 

In terms of coverage, 98.2% of the B20 community are covered by at least one form of social assistance. When it came to if this coverage was enough, Malaysia scored 7.8%. This meant that even though 98.2% were of the B20 community were covered, this only represented 7.8% of the country’s post-transfer income. With a high coverage but low adequacy rate, Malaysians are faced with more limited programmes but distributed more widely. 

Indonesia has a higher adequacy rate (27.3%) than Malaysia; however, it has lower coverage. 

Who benefits from Malaysia’s social assistance benefits the most? 

The B20 community only receives a small portion of the total social assistance benefits because higher income groups receive a substantial amount. The World Bank states that 53.2% goes to B40; 37.2% to M40; 9.5% to T20. 

Why is it important to have good social protection systems? 

When a country provides good social protection for its people, it provides them with insurance against sudden changes or economic shocks, making them financially vulnerable. The nation’s lower-income groups will be protected against extreme poverty and still be provided with equal opportunities to acquire work. By protecting the labour force, it will have a higher chance of fully utilising its entire labour force, increasing productivity and boosting the economy beyond limits. 

As of 2021, there are 9.6 million individuals are excluded from the injury and invalidity scheme meanwhile the employment injury scheme excluded 14.0 million individuals [2]. This includes the unpaid family workers, unemployed persons, and people outside the labour force who are unable to contribute to the schemes. At the same time, it is estimated that 3 out of 5 working age individuals (15-64 years old) were not part of formal old-age retirement in 2019 [2].

Whilst Malaysia fares very well in terms of coverage, in comparison to other ASEAN countries, it still lacks in terms of adequacy and benefits. Only when there is proper protection can the country thrive with its people not committing to multiple jobs to make things work.

Better delivery of social assistance to at-risk communities is needed. We cannot blame the poor for relying on countless financial aid schemes when there is simply not enough social protection for them to survive without it. 

Explore Our Sources

  1. World Bank. (2021). Aiming High: Navigating the Next Stage of Malaysia’s Development. Link
  2. Khazanah Research Institute. (2021). Building Resilience: Towards Inclusive Social Protection in Malaysia. Link
  3. All image sources are from World Bank. (2021). Aiming High: Navigating the Next Stage of Malaysia’s Development. Link

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